EXHIBIT 4.4
HCC INSURANCE HOLDINGS, INC.
1996 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The HCC INSURANCE HOLDINGS, INC. 1996 NONEMPLOYEE DIRECTOR STOCK OPTION
PLAN (the "Director Plan") is intended to promote the interest of HCC
Insurance Holdings, Inc., a Delaware corporation (the "Company"), and its
Shareholders by helping to award and retain highly-qualified independent
directors, and allowing them to develop a sense of proprietorship and
personal involvement in the development and financial success of the Company.
Accordingly, the Company shall grant to directors of the Company who are not
employees of the Company or any of its subsidiaries ("Nonemployee Directors")
the option ("Option") to purchase shares of the common stock of the Company
("Stock"), as hereinafter set forth. Options granted under the Director Plan
shall be options which do not constitute incentive stock options, within the
meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended.
2. OPTION AGREEMENTS
Each Option shall be evidenced by a written agreement in
the form attached to the Director Plan.
3. ELIGIBILITY OF OPTIONEE
Options may be granted only to individuals who are Nonemployee
Directors of the Company. Each Nonemployee Director who was serving on the
Board of Directors of the Company (the "Board") on December 14, 1995, shall
receive, as of such date and without the exercise of the discretion of any
person or persons, an Option exercisable for 5,000 shares of Stock. Each
individual who is a Nonemployee Director as of the date of the regularly
scheduled Board of Directors meeting to be held in December of each year and
without the exercise of the discretion of any person or persons, will be
granted an Option exercisable for 5,000 shares of Stock (subject to
adjustment in the same manner as provided in Paragraph VII hereof with
respect to shares of Stock subject to Options then outstanding). If, as of
any date that the Director Plan is in effect, there are not sufficient shares
of Stock available under the Director Plan to allow for the grant to each
Nonemployee Director of an Option for the number of shares provided herein,
each Nonemployee Director shall receive an Option for a prorata share of the
total number of shares of Stock then available under the Director Plan. All
Options granted under the Director Plan shall be at the Option price set
forth in Paragraph V hereof and shall be subject to adjustment as provided in
Paragraph VII hereof.
4. SHARES SUBJECT TO THE DIRECTOR PLAN
The aggregate number of shares which may be issued under Options granted
under the Director Plan shall not exceed 250,000 shares of Stock. Such shares
may consist of authorized but unissued shares of Stock or previously issued
shares of Stock reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Options at the termination
of the Director Plan shall cease to be subject to the Director Plan, but,
until termination of the Director Plan, the Company shall at all times make
available a sufficient number of shares to meet the requirements of the
Director Plan. Should any Option hereunder expire or terminate prior to its
exercise in full, the shares theretofore subject to such Option may again be
subject to an Option granted under the Director Plan. The aggregate
number of shares which may be issued under the Director Plan shall be subject
to adjustment in the same manner as provided in Paragraph VII hereof with
respect to shares of Stock subject to Options then outstanding. Exercise of
an Option shall result in a decrease in the number of shares of Stock which
may thereafter be available, both for purposes of the Director Plan and for
sale to any one individual, by the number of shares as to which the Option is
exercised.
5. OPTION PRICE AND PERIOD
The purchase price of Stock issued under each Option shall be the fair
market value of Stock subject to the Option as of the date the Option is
granted. For all purposes under the Director Plan, the fair market value of a
share of Stock on a particular date equal to the closing sales price of the
Stock on the applicable national securities exchange including Nasdaq
National Market System, that the Stock shall be listed on that date, or if no
price is reported on that date, on the last preceding date on which such
price of the Stock are so reported. In the event the Stock is not publicly
traded at the time a determination of its fair market value is required to be
made hereunder, the determination of its fair market value shall be made by
the Board in such manner as it deems appropriate.
Except as otherwise provided herein, each option and all rights or
obligations thereunder shall expire on the tenth anniversary of the grant
date (the "Expiration Date"), and shall be subject to earlier termination as
hereinafter provided.
6. TERM OF DIRECTOR PLAN
The Director Plan shall be effective on the date the Director Plan is
approved by the Shareholders of the Company. Except with respect to Options
then outstanding, if not sooner terminated under the provisions of Paragraph
7, the Director Plan shall terminate upon and no further Options shall be
granted after December 18, 2000.
7. RECAPITALIZATION OR REORGANIZATION
(a) The existence of the Director Plan and the Options granted
hereunder shall not affect in any way the right or power of the Board or the
Shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of debt or equity securities, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part
of its assets or business or any other corporate act or proceeding.
(b) The shares with respect to which Options may be granted
are shares of Stock as presently constituted, but if, and whenever, prior to
the expiration of an Option theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Stock or the payment of a stock
dividend on Stock without receipt of consideration by the Company, the number
of shares of Stock with respect to which such Option may thereafter be
exercised (i) in the event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number
of outstanding shares shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
(c) If the Company merges or consolidates with one or more
corporations and the Company shall be the surviving corporation, thereafter
upon any exercise of this Option the Grantee shall be entitled
-2-
to purchase under this Option, in lieu of the number of shares of Stock as to
which Option shall then be exercisable, the number and class of shares of
stock and securities to which the Grantee would have been entitled pursuant
to the terms of the agreement of merger or consolidation if, immediately
prior to such merger or consolidation, the Grantee had been the holder of
record of the number of shares of Stock as to which this Option is then
exercisable. If the Company shall not be the surviving corporation in any
merger of consolidation, or if the Company is dissolved or liquidated, this
Option shall expire on the effective date of such merger or consolidation or
such dissolution or liquidation; provided, that nothing herein shall preclude
a surviving corporation or other corporation into which stock of the Company
may be converted from assuming or substituting new options for the Option
granted hereunder, which assumption or substitution may be made without the
consent of the holder of this Option to such assumption, substitution, merger
or consolidation, and further provided that immediately prior to such
expiration, the entire number of shares of Stock for which this Option may be
exercised shall be accelerated so that Grantee shall have the opportunity to
exercise the entire unexpired portion of this Option prior to its expiration.
The Company agrees to give at least 30 days prior notice to Grantee of the
effective date of any such merger, consolidation, dissolution or liquidation.
If the Company is acquired by another entity, in any manner, so that
following such acquisition the Company is a subsidiary of another entity, the
Company shall be deemed to be not the surviving corporation for purposes of
this subparagraph (e).
(d) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore granted the
optionee shall be entitled to purchase under such Option, in lieu of the
number and class of shares of Stock then covered by such Option, the number
and class of shares of stock and securities to which the optionee would have
been entitled pursuant to the terms of the recapitalization if, immediately
prior to such recapitalization, the optionee had been the holder of record of
the number of shares of Stock then covered by such Option.
(e) Any adjustment provided for in Subparagraphs (b), (c) or (d) above
shall be subject to any required Shareholder action.
(f) Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible into shares
of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of share or obligations of the Company convertible into such
shares or other securities, and in any case whether or not for fair value,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to Options theretofore
granted or the purchase price per share.
8. AMENDMENT OR TERMINATION OF THE DIRECTOR PLAN
The Board in its discretion may terminate the Director Plan at any time
with respect to any shares for which Options have not theretofore been
granted. The Board shall have the right to alter or amend the Director Plan
or any part thereof from time to time; provided, that no change in any Option
theretofore granted may be made which would impair the rights of the optionee
without the consent of such optionee; and provided, further, that the Board
may not make any alteration or amendment which would materially increase the
benefits accruing to participants under the Director Plan, increase the
aggregate number of shares which may be issued pursuant to the provisions of
the Director Plan, change the class of individuals eligible to receive
Options under the Director Plan or extend the term of the Director Plan,
without the approval of the Shareholders of the Company.
-3-
9. SECURITIES LAWS
(a) The Company shall not be obligated to issue any Stock pursuant to
any Option granted under the Director Plan at any time when the offering of
the shares covered by such Option have not been registered under the
Securities Act of 1933, as amended, (the "Act") and such other state and
federal laws, rules or regulations as the Company deems applicable and, in
the opinion of legal counsel for the Company, there is no exemption from the
registration requirements of such laws, rules or regulations available for
the offering and sale of such shares.
(b) It is intended that the Director Plan and any grant of an Option
made to a person subject to Section 16 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), meet all of the requirements of Rule
16b-3, as currently in effect or as hereinafter modified or amended ("Rule
16b-3"), promulgated under the 1934 Act. If any provision of the Director
Plan or any such Option would disqualify the Director Plan or such Option
under, or would otherwise not comply with, Rule 16b-3, such provision or
Option shall be construed or deemed amended to conform to Rule 16b-3.
10. VESTING AND EXERCISE OF OPTIONS
(a) An option granted hereunder shall be fully exercisable at the first
anniversary of the Date of Grant.
(b) The purchase price of the Stock purchased upon exercise of an
option shall be paid in full at the time of each exercise of an option and
may be paid to the Company, either:
(1) in cash (including a check, bank draft or money order); or
(2) by the delivery of Stock having a fair market value
equal to the aggregate Option price;
or
(3) by a combination of cash and Stock.
No options shall be exercisable except in respect of whole shares of Stock.
Upon exercise of an option, the person exercising the option shall be
entitled to one (1) stock certificate evidencing the shares acquired upon
such exercise.
(c) An option granted under the Director Plan shall, by its terms, be
nontransferable by the Nonemployee Director other than by will or by the laws
of descent and distribution. During the Nonemployee Director's lifetime, the
option shall be exercisable only by the Nonemployee Director or by the
Nonemployee Director's duly appointed guardian or personal representative.
(d) If the directorship of the Nonemployee Director is terminated for
any reason other than (i) Disability (as hereinafter defined) of the
Nonemployee Director, (ii) death of the Nonemployee Director, or (iii) on
account of any act of fraud or intentional misrepresentation or embezzlement,
misappropriation or conversion of assets or opportunities of the Company, or
cause as determined by the Board of Directors, an option (to the extent
otherwise exercisable by the Nonemployee Director on the date of such
termination) shall be exercisable by the Nonemployee Director at any time
prior to the Expiration Date of the Option or within two (2) months after the
date of such termination of the directorship, whichever is the shorter
period.
-4-
(e) If the Nonemployee Director's directorship is terminated by reason
of Disability, an option (whether or not exercisable on the date of the
Nonemployee Director's termination of directorship by reason of Disability)
shall be exercisable by the Nonemployee Director at any time prior to the
Expiration Date of the option or within six (6) months after the date of such
termination, whichever is the shorter period. As used herein, the term
"Disability" shall mean the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to last for a continuous period of not less
than twelve (12) months. The determination of whether or not a Nonemployee
Director's directorship is terminated by reason of Disability shall be in the
sole and absolute discretion of the Board. An individual shall not be
considered Disabled unless he furnishes proof of the existence thereof in
such form and manner, and at such times, as the Board may require.
(f) If a Nonemployee Director dies while serving as a member of the
Board or during the six-month period described in subsection (e) above, the
option shall be exercisable (whether or not exercisable on the date of the
death of such Nonemployee Director) by the person or persons entitled to do
so under the Nonemployee Director's will, or, if the Nonemployee Director
shall fail to make testamentary disposition of said option or shall die
intestate, by the Nonemployee Director's legal representative or
representatives, at any time prior to the Expiration Date of the option or
within six (6) months after the date of such death, whichever is the shorter
period. If a Nonemployee Director dies during the two-month period described
in subsection (d) above, the option shall be exercisable as described above.
(g) The option of a Nonemployee Director shall automatically terminate
as of the date his directorship is terminated, if the directorship is
terminated on account of any act of (i) fraud or intentional
misrepresentation, or (ii) embezzlement, misappropriation or conversion of
assets or opportunities of the Company or (iii) cause as determined by the
Board of Directors.
11. MISCELLANEOUS
(a) Nothing contained in this Director Plan (nor in any option granted
pursuant to this Director Plan) shall confer upon any Nonemployee Director
any right to continue as a member of the Board or constitute any contract or
agreement or interfere in any way with the right of the Company to remove
such Nonemployee Director from the Board. Nothing contained herein or in any
Option Agreement shall affect any other contractual rights of a Nonemployee
Director.
(b) An option shall be deemed to be exercised when the Secretary of the
Company receives written notice of such exercise from the person entitled to
exercise the option together with payment of the purchase price made in
accordance with this Director Plan.
(c) The holder of an option shall not be entitled to the privilege of
stock ownership as to any shares of Stock not actually issued and delivered
to the holder. Subject to the provisions of item 9. above, upon exercise of
an option for Stock at a time when there is not in effect under the Act a
registration statement relating to the Stock issuable upon exercise thereof
or not available for delivery a prospectus meeting the requirements of
Section 10 of the Act, the holder of the option shall represent and warrant
in writing to the Company that, inter alia, the shares of Stock purchased are
being acquired for investment and not with a view to the resale or
distribution thereof. No shares of Stock shall be issued upon the exercise of
any option unless and until there shall have been compliance with any then
applicable requirements of the Securities and Exchange Commission, other
regulatory agencies having jurisdiction and any exchanges upon which
securities subject to the option may be listed.
-5-
(d) The Director Plan and the options issued hereunder shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware applicable to contracts made and performed within that
State.
(e) The proceeds received by the Company from the sale of shares
pursuant to options shall be used for general corporate purposes.
(f) The members of the Board shall not be liable for any act, omission
or determination taken or made in good faith with respect to the Director
Plan or any option granted under it.
(g) Any payment or any issuance or transfer of shares of Stock to the
Nonemployee Director, or to his legal representative, heir, legatee or
distributee, in accordance with the provisions hereof, shall, to the extent
thereof, be in full satisfaction of all claims of such persons hereunder. The
Board may require any Nonemployee Director, legal representative, heir,
legatee or distributee, as a condition precedent to such payment, to execute
a release and receipt therefor in such form as it shall determine.
(h) Neither the Board nor the Company guarantees the Stock of the
Company from loss or depreciation.
(i) All expenses incident to the administration or termination of the
Director Plan, including, but not limited to, legal and accounting fees,
shall be paid by the Company.
(j) Records of the Company regarding the Nonemployee Director's period
of service, termination or service and the reason therefor, leaves of
absence, and other matters shall be conclusive for all purposes hereunder,
unless determined by the Board to be incorrect.
(k) The Company shall, upon request or as may be specifically required
hereunder, furnish or cause to be furnished all of the information or
documentation which is necessary or required by the Board to perform its
duties and functions under the Director Plan.
(l) The Company assumes no obligation or responsibility to the
Nonemployee Director or his or her personal representatives, heirs, legatees
or distributees for any act of, or failure to act on the part of the Board.
(m) Any action required of the Company shall be by resolution of the
Board or by a person authorized to act by Board resolution.
(n) If any provision of this Director Plan shall be held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but shall be fully severable and the Director
Plan shall be construed and enforced as if the illegal or invalid provision
had never been included herein.
(o) Whenever any notice is required or permitted hereunder, such notice
must be in writing and personally delivered or sent by mail. Any notice
required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered in accordance
herewith. The Company or a Nonemployee Director may change, at any time and
from time to time, by written notice to the other, the address which it or he
had theretofore specified for receiving notices. Until it is changed in
accordance herewith, the Company and each Nonemployee Director shall specify
as its and his address
-6-
for receiving notices the address set forth in the Option Agreement
pertaining to the shares to which such notice relates.
(p) Any person entitled to notice hereunder may waive such notice.
(q) The Director Plan shall be binding upon the Nonemployee Director,
his or her heirs, legatees and legal representatives, upon the Company, its
successors and assigns and upon the Board and its successors.
(r) The titles and headings of sections and paragraphs are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.
(s) Words used in the masculine shall apply to the feminine where
applicable and, wherever the context of this Director Plan dictates, the
plural shall be read as the singular and the singular as the plural.
HO961650040
091396 v4 lsd
228:6468-3